Multi-business firms should design the task portfolio of their headquarters (HQ) and the way
HQ tasks are carried out so that net value creation results. While the strategic management
literature has emphasized such parenting benefits, less attention has been paid to the costs that
may inadvertently be caused by HQ actions. Using a simple game theory model, we analyze
the motivational costs that may result from HQ intervention in subunits. Along the lines of the
procedural justice literature, we identify the conditions under which these costs may be
influenced by the existence of fairness expectations among subunit managers. Our analysis of
the dynamic game between HQ and subunits has novel and non-intuitive results. For example,
we find that good parenting may involve forgoing opportunities for value-creation, and that
procedural justice systems may sometimes be counterproductive. Our findings contribute to
both the HQ and the procedural justice literatures.

The MNC literature treats the (parent) HQ as entirely benevolent with respect to their
perceived and actual intentions when they intervene at lower levels of the MNC.
However, HQ may intervene in subsidiaries in ways that demotivate subsidiary
employees and managers (and therefore harm value-creation). This may happen even if
such intervention is benevolent in its intentions. We argue that the movement away
from more traditional hierarchical forms of the MNC and towards network MNCs
placed in more dynamic environments gives rise to more occasions for potentially
harmful intervention by HQ. Network MNCs should therefore be particularly careful to
anticipate and take precautions against “intervention hazards.” Following earlier
research, we point to the role of normative integration and procedural justice, but argue
that they also serve to control harmful HQ intervention (and not just subsidiary
opportunism).